CBD Kratom aims to grow business — albeit a wee bit later than expected — with small stores – STLtoday.com

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ST. LOUIS — An expansion plan by CBD Kratom, the largest St. Louis-area chain of stores specializing in products made from a cannabis compound, has long hinged on shrinking the size of future shops.

This was the concept: Market potential in Boston and New York is sky-high. But so is rent. So build a skinny little store, close to subways and population centers, where foot traffic is nearly guaranteed.

Owners Dafna Revah and her husband David Palatnik had wanted to open them by this fall.

Then the new coronavirus hit. Travel restrictions started. And suddenly scouting locations got much harder.

Now Revah and Palatnik have switched mainly to online sales, with curbside pickup at five St. Louis-area locations. Consumers are stocking up, the company said, and placing larger orders than usual.

But, in the meantime, the couple keeps planning for expansion.

Retail experts say they’re on the right path, regardless of the delay.

“It’s long been known that small is a great way to introduce yourself to the market in a safe way, in a put-your-toe-in-the-shallow-end kind of way,” said Diana Dawson, vice president of advisory services at Envirosell, a Manhattan-based firm specializing in behavioral research that does consulting for retail spaces.

There will likely be challenges: finding space to give customers privacy as they ask about CBD products; having enough product on hand; and deciding what to display versus what to keep in the storeroom.

”You have to make some judicious decisions on what you’re going to sell,” Dawson said, decisions that must be carefully tailored to the store’s neighborhood and customers within walking distance of the shop.

Experimenting with smaller, more urban locations where space is at a premium has been undertaken by bigger retailers including Walmart, Nordstrom, Target and Macy’s. Those stores are looking to cater to city-dwelling millennials who may not own a car and can’t easily get to suburban box stores.

CBD Kratom sells products infused with cannabidiol, an active compound in cannabis. It doesn’t cause a high like marijuana does — instead, it is touted as a health supplement for ailments such as insomnia, muscle pain and anxiety.

Its effectiveness at treating such maladies largely remains unstudied. Epidiolex is the only CBD medication with Food and Drug Administration approval to treat two rare and severe forms of epilepsy.

CBD Kratom’s products include CBD oils and edibles, pain creams and tinctures as well as bath and hemp products. It also sells more than 45 strains of kratom, a powder marketed as a mood booster that is derived from a tree found in Southeast Asia but that has been linked to deaths in the St. Louis area.

More than 20 retailers have opened around St. Louis in the last three years dedicated to the sale of CBD, a compound found in cannabis increasingly used to treat ailments like pain and anxiety. But does it work? And is it legal? The answers are still unclear.

Palatnik and Revah opened the first CBD Kratom location in Chicago in 2016, and the chain has grown to more than 30 locations elsewhere, including in the St. Louis area, Dallas and Houston. They also own and sell CBD products at some Mr. Nice Guy smoke shops.

”We’ve always had this dream of going into multiple cities,” Revah said.

Their competition has grown as similar specialty stores have opened around the region and retailers including Walmart, CVS and Dierbergs Markets now carry CBD products.

The company employs 250 people, 115 in the St. Louis area. It would not release its annual sales, but said its two most profitable stores are in starkly different locations with very different clients — suburban Wentzville and the urban Bucktown neighborhood of Chicago.

”While we like what we do with the shops, we do understand that four years have gone by and other companies are doing similar things,” Palatnik said. “So what we’re looking to do is innovate and create something new.”

Revah and Palatnik hired Rustic Grain, a Crestwood furniture company, to develop a prototype for the new stores that maximizes vertical space. It compresses the company’s product into as little as 300 square feet of retail space, or about one-third to one-fifth the size of most current stores.

Shelves climb to the ceiling. The area behind the counter is gone. The bottom 4 feet of wall space, which often goes unused in stores because it’s not easy for customers to see or reach, won’t be left empty in the store Palatnik and Revah envision.

It’s the first time Rustic Grain has developed a small-store concept, said owner Tim Nummela. The design uses reclaimed wood from barns that are around 100 years old, along with metal, glass and commercial finishes for inside the cabinets.

Edward Oechsner, production assistant at Rustic Grain in Crestwood, sands a front counter for a future CBD Kratom store on Wednesday, Feb. 26, 2020. CBD Kratom owners are planning to open smaller stores in larger cities, calling for a redesign of their product display cases. Photo by Robert Cohen, rcohen@post-dispatch.com

Revah and Palatnik enlisted a firm to search for locations for the smaller-footprint stores.

And while they’re still thinking smaller for their next step, they also plan to expand locally into bigger spaces. The company is set to move into a new 30,000-square-foot space in Creve Coeur from its current headquarters in Pagedale, which the company will keep for storage.

And a renovation is set for its store in the Tower Grove South neighborhood to convert some of its storage space, which is triple the size as the retail area, into a sales floor.